There are several methods of money transfer. The most popular method today is United Payments Interface (UPI). Another method is Immediate Payment Service or IMPS. Both these methods have been developed by National Payments Corporation of India. These are instantaneous. IMPS is available round the clock. Banks allow two methods of money transfer — NEFT or national electronics fund transfer and RTGS or real-time gross settlement. A customer has these choices. These transfer methods can exist simultaneously.

CBDC has been introduced of late. It appears as a liability in the central bank’s balance sheet. There is no merchant discount rate (MDR) involved here. The cost is borne by the RBI. Cash transfers are not always convenient. CBDC scores over cash. CBDC transfers are to digital wallets. The RBI is working on offline mode of CBDC transfers. Here a sub-wallet can be used for offline mode. The accounts will be balanced after the connectivity is restored.

As there is wallet-to-wallet exchange, there is anonymity equal to cash transactions. The transactions are not reflected in the CBS. CBS captures only the transaction when the bank transfers CBDCs to a wallet. It is just like a withdrawal transaction. All UPI transactions are captured by CBS.

Of course, there are digital trails of wallet-to-wallet transactions. The RBI is working on this too — It should be erased completely. The effort is to mimic cash.

CBDCs could reduce the cost of sending remittances from abroad.